Bank-fintech tie up will boost innovation, risk management: RBL CEO

Collaboration between banks and fintechs will enhance innovation, which is necessary for achieving scale and financial stability, said R Subramaniakumar, managing director (MD) & chief executive officer (CEO), RBL Bank.

“Fintechs can collaborate with entities (banks) that are already experienced in risk underwriting and assessment. This will be beneficial for the customers,” he said.

During a panel discussion at Global Fintech Fest 2024 (GFF), Subramaniakumar said, “Innovation is free-wheeling. It is a must-have if you want to have scale with sustainability and financial stability. This is also where the regulator is stepping in. When the audience is large, you have a greater responsibility as it ensures that larger audiences are protected and that no unfair practices are occurring. So, the fintechs can collaborate with somebody who is already experienced in risk underwriting and assessment.”

The experience of banks and non-banking financial companies (NBFCs) in risk underwriting and risk assessment will help in improving customer experience.

He said that banks and fintechs collaborating with each other based on their domain expertise and sharing the risk seamlessly will reap success.

Sudipta Roy, MD & CEO, L&T Finance, said banks and NBFCs can gain insights into user experience and trade administration models by learning from fintechs who excel in these areas.

On the other hand, traditional lenders are better off in terms of portfolio management.

He added that fintechs have excelled in creating seamless and efficient user experiences, which addresses friction. Innovations like video KYC, which can be completed in 5-6 minutes, has improved the experience for customers while also following regulatory norms.

Secondly, fintechs are also better in terms of trade administration models, including credit underwriting.

Traditional credit underwriting methods, which rely on post-event reporting, are becoming outdated. Fintechs have more dynamic, real-time and data-driven approaches.

Shifting by banks and NBFCs is essential because relying solely on historical data and delayed reporting can result in outdated credit assessments.

For instance, data analysis shows that users of betting and gaming apps have higher loss rates, highlighting the need for more granular and timely data in underwriting.

Lastly, portfolio management is an area where traditional financial institutions currently excel compared to fintechs.

While fintechs have made significant strides in user experience and credit underwriting, they still lag in managing portfolios.

The financial ecosystem is in a state of flux, with ongoing efforts to align these three areas.

Over the next few years, improvements are expected as the industry works to harmonise user experience, trade administration models, and portfolio management.